How to handle Christmas holiday week volatility

So holiday season is finally here, you’ve bought all your presents and decorated the lounge, now to turn your mind to potential trading volatility during the Christmas break in Forex rates. Volatility during trading at Christmas can play havoc with your Forex trading, with banks being closed and people being off work, there is also plenty of outside interference taking your concentration away from your trading.

While many traders will take the week to recharge their batteries, for those of you who can’t get enough we’ve compiled a list of tips regarding what can be a week of high trading volatility.

So if you are going to brave the market trading volatility then here are some things to look out for;

Banks are closed, as they are the major movers in the markets be prepared for very slow trading trading volatility can be negatively affected by low liquidity in the market.

Brokers often close. Whilst less and less common due to the global market in Forex trading, some will still close. Watch out for wide spreads as brokers try and profit from low liquidity.

Forex indicators – Due to unusual trading conditions, if you use an indicator it’s going to be less accurate during this period. Use with caution.

Lack of news – lack of news ultimately means a lack of movement, governments shut down and media agencies turn their attentions to happier news, and Christmas films. So no business news means poor movement.

During the Christmas break many traders will also take a break, as they are unwilling to try their luck against low liquidity and high trading volatility. With banks out of the market and a lack of news stories to move the market Forex rates will come with high trading volatility, though on the plus side if you’re a trader who likes a little taste of risk it can also be a potentially lucrative time of the year.

As everyone has their backs turned any news stories could spike the market in your favor. Though the general consensus is that most traders will avoid trading, uncertainty in Forex rates is not a friend to traders, and most will not like to leave positions open, or even open new ones over this period.

The brokers who do operate are sure to want to make a tasty profit and spreads are likely to be less favorable for traders, as they try to offset the lack of liquidity which will no doubt hamper their profitability for the period. They still have to pay their staff and will try and pass on as much of that cost as possible.

Christmas trading will certainly require some appetite for risk, and extra diligent use of stop limits! But there is always money to be made in the Forex market even with trading volatility, you just have to hope you’re on the right side of fortune. 2016 has been an extremely volatile year, political instability and several major events have meant for a wild ride, and many will hope for more settled trading conditions in 2017.

Related

Learning FX

The idea is to basically help out others trade and understand the foreign exchange market with more ease. My articles and trade ideas are based on my experience and are for educational purposes only.
You can follow our updates on twitter